GL Impact of Standalone Invoice

The GL Impact of a standalone invoice for an inventory item (with no tax) reflects the financial accounting entries that NetSuite generates to record the sale, the cost of goods sold (COGS), and the reduction of inventory. Let’s break it down in detail, using the screenshot you’ve provided as an example.

1. What is a Standalone Invoice?

A standalone invoice is an invoice created without being linked to a sales order. This type of invoice typically arises when there is no formal sales order process, but the business needs to bill a customer for inventory items.

2. Key Elements of the GL Impact

The GL impact of a standalone invoice for an inventory item involves the following accounts:

a. Accounts Receivable (A/R):

• This account is debited to record the amount the customer owes.
• The value debited is the invoice amount, including the item’s price and any applicable taxes.

b. Revenue:

• The sales revenue account is credited to reflect the sale of the inventory item.
• The amount credited is the item’s price (excluding taxes).

c. Cost of Goods Sold (COGS):

• The COGS account is debited to recognize the expense incurred for selling the inventory.
• The value debited is based on the item’s cost from inventory valuation.

d. Inventory Asset:

• The inventory asset account is credited to reduce the inventory value in your balance sheet.
• The amount credited is the same as the amount debited to COGS.

Example Scenario:

• Selling Price of the inventory item: $15,048.00
• Cost of the inventory item: $15,048.00
• No tax is involved.
• The transaction is recorded as a standalone invoice (not associated with a sales order).

Detailed Explanation of Each GL Entry:

1. Accounts Receivable (Debit – $15,048.00):

• This represents the total amount the customer owes for the invoice.
• AR increases as the customer has been billed for the sale.

1. Sales (Credit – $15,048.00):

• Revenue is recognized for the sale at the selling price of $15,048.00.
• This credit increases your income in the profit and loss (P&L) statement.

1. Cost of Goods Sold (COGS) (Debit – $15,048.00):

• The cost of the inventory item is recorded as an expense.
• This matches the expense (COGS) with the recognized revenue in the P&L, adhering to the matching principle in accounting.

1. Inventory Asset (Credit – $15,048.00):

• The inventory account is reduced by the cost of the item sold.
• This credit decreases the inventory value in the balance sheet.

Matching Principle:

In accounting, the matching principle ensures that the cost associated with generating revenue is recorded in the same period as the revenue. In this example:

• Revenue of $15,048.00 is matched with the COGS of $15,048.00.

This approach ensures accurate profit calculation.

Financial Impact:

• Profit/Loss Statement:
• Revenue (Credit): $15,048.00 (Increase in income)
• COGS (Debit): $15,048.00 (Increase in expense)
• Net Impact on P&L: $0.00 (No profit since selling price equals cost).
• Balance Sheet:
• Accounts Receivable (Debit): $15,048.00 (Increase in assets).
• Inventory (Credit): $15,048.00 (Decrease in assets).

Summary of GL Impact:

• Revenue is recognized for the sale amount.
• COGS reflects the cost of the inventory item sold.
• AR increases, showing the customer’s outstanding balance.
• Inventory decreases, showing the reduction of goods in stock.

This GL impact is standard for a standalone invoice for an inventory item with no tax applied.